NEW YORK — Fitch Ratings believes a thoughtful approach to the long-term implementation and support of managed lanes (MLs) is critical as state departments of transportation (DOTs) evaluate such projects. Revenue from these projects tends to be volatile, meaning a poorly planned strategy could have an adverse impact on budgets, particularly if the goal is for the project to be self-supporting.
A recent study by the U.S. Department of the Treasury and the Council of Economic Advisors encourages this discussion because, they say, construction costs are relatively low. The study also found that the average American family spends $7,600 per year on transportation and that congestion wastes 1.9 billion gallons of gas annually and costs $100 billion in fuel and lost productivity.
Managed lanes are highway lanes on which vehicles with one or more passengers drive free while those with only a single occupant pay a toll. Toll rates may be adjusted up or down as frequently as every five minutes based on the time of day and congestion levels. All tolls are collected electronically. Peak hour tolls for cars with one occupant may be three times as high as on other toll roads, and thus, increased carpooling and use of public transportation may result.
Fitch said that the financial profile of MLs needs to be evaluated carefully, as these projects are more sensitive than other toll roads to changes in fuel costs and the economy. From 2007 to 2011, the stretch of Interstate 91 in Orange County, Calif., saw an overall traffic reduction of 5.5 percent, but the ML component dropped by 17.2 percent. By reducing the peak rate tolls, ML revenue dropped by just 12.6 percent. But this type of reduction may be difficult for some treasurers to forecast.
For more details on empirical data on newer projects and the techniques Fitch uses to analyze these projects, see "Paying for Predictability," dated April 2, 2012, available at www.fitchratings.com.